Still Falling
The Dubai Financial Market broke through the 400 level today. Since Jan 1, that's a 60% drop; though Jan 1 is a rather artificial day on which to start counting.
Since its peak of 1303, the DFM has dropped 70% to 393. Some of this is a vicious circle: several of the stocks listed on the DFM are bank stocks that invested heavily in the market, so, as the market goes down, they drag it even lower. The largest stock in the market, EMAAR, keeps dropping, as rumours fly of future problems: they have now arranged financing, so the buyer need only put 5% down and not start paying until completion. Before, they demanded 30% down. Does this mean they are running out of buyers, and are desperate to take such a small down payment, or does it mean that the recent announcement that foreign ownership is legal makes it much easier to borrow money for a construction loan, so the number of potential buyers has just greatly expanded?
Meanwhile, the DFM is one of the very few markets in the world where anyone who can get a tourist visa is allowed to fly in and invest. But, of course, who wants to fly in during the summer, when it's 45 degrees out (or 113 for American investors)? Perhaps if they allowed investors to do everything over the Web, as the US markets do?
UAE stocks seem fairly valued now, or even bargains, but, with a crash, stocks usually drop well below fair value as investors sell in panic, just as, during the boom that preceeded the crash, they rose well above fair value as investors bought in panic.
Several commenters to my postings have promised that, once summer is over, all will be well with the DFM.
May their promises prove correct.
Since its peak of 1303, the DFM has dropped 70% to 393. Some of this is a vicious circle: several of the stocks listed on the DFM are bank stocks that invested heavily in the market, so, as the market goes down, they drag it even lower. The largest stock in the market, EMAAR, keeps dropping, as rumours fly of future problems: they have now arranged financing, so the buyer need only put 5% down and not start paying until completion. Before, they demanded 30% down. Does this mean they are running out of buyers, and are desperate to take such a small down payment, or does it mean that the recent announcement that foreign ownership is legal makes it much easier to borrow money for a construction loan, so the number of potential buyers has just greatly expanded?
Meanwhile, the DFM is one of the very few markets in the world where anyone who can get a tourist visa is allowed to fly in and invest. But, of course, who wants to fly in during the summer, when it's 45 degrees out (or 113 for American investors)? Perhaps if they allowed investors to do everything over the Web, as the US markets do?
UAE stocks seem fairly valued now, or even bargains, but, with a crash, stocks usually drop well below fair value as investors sell in panic, just as, during the boom that preceeded the crash, they rose well above fair value as investors bought in panic.
Several commenters to my postings have promised that, once summer is over, all will be well with the DFM.
May their promises prove correct.
posted by Dubai@Random at 5:43 pm
4 Comments:
I hope so too, although I heard from someone in the know ( investment banker) the other day that there was some urgent pumping of funds, by those in high places, into the stock market companies (mostly Emaar) to try to stop the decline. I guess that it can only go on for so much longer.
There needs to be found a balance between what is being built and what is being sold. No matter what they're telling us, I don't believe that all these apartments and villas are sold yet, as other markets would define "sold" as being purchased by private investors, and not propped up by bridging finance or transitions that are done only on paper with no money being exchanged.
If all the apartments in the Dubai Marina 1 were sold as we heard that they were 2 years ago, we estimate by the number of actual apartments that we can see activity in, that there are only 30% at the most being lived in by the owners or by renters.
That means that the other 70% have been bought by people who are content to let them sit empty? That's a lot of private investors who can afford to do that!
Emaar has been given permission to buy its own stock with its profits. If they've actually done any of this, it's not apparent in the stock movement.
The drop below 400 apparently caused someone to put some money in today, over US$100,000,000.
But it's still below 400.
Based on the US crash of 29, the market could drop down to 150, but I don't think that will happen.
$100,000,000 - that's a lot of moolah to not make a difference!
Maybe it'll take a couple of days to register - the Dubai Stock Exchange could also be running on Inshallah-time!
:-)
Dubai, Decree No. (14) of 2021
Dubai, Law No. (2) of 2022
Dubai, Law No. (1) of 2022
Dubai, Law No. (27) of 2021
Dubai, Law No. (26) of 2021
Post a Comment
<< Home